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Canadian National Railway Company (CNR)
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iShares Core S&P U.S. Total Market Index ETF (XUU)
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Vanguard Canadian Aggregate Bond Index ETF (VAB)
I originally put a 30% allocation for bonds when I started 4 years ago, mostly because that's what was usually advised for those in my position (about 10 years out from retirement).
However, I have put no new money into bonds over that time because the ones I own have been the worst part of my portfolio. They did not act as ballast when the market went down - they seemed more volatile than most of my conservative equities. They also did not go up appreciatively when interest rates rose, and overall, even with the payouts, I'm in the red on these bonds over the past 4 years.
I heard you mention bonds in asset allocation on the recent podcast but I didn't sense any great endorsement of them. Other than the traditionally recommended 60-40 or 70-30 split, can you offer reasons not to sell them off and buy conservative stocks like CN, CSU, BN, etc or else broad-based index funds like XIC, XUU etc.?
Bonds can still serve a purpose. They do of course rank higher than stocks, and can generate cash flow during rough economic times, where dividends are less secure. But mostly, we would not look at the past three or four years as 'normal'. In the pandemic rates went to zero, and as interest rates rose bonds got crushed. They nearly fell three years in a row, if not for a 4Q rally in 2023. They, essentially, have never been this bad before, in more than 300 years. As rates peak, and perhaps fall, we would expect significantly better performance from bonds. Being growth investors and equity people, we don't talk about them too much here. But bonds can be a very important part of an asset allocation decision, and if one wants to abandon bonds we do not think now is the right time.